Energy storage is playing a growing role in the clean energy transition, helping to stabilize the grid, store intermittent power, and enhance project performance. The Inflation Reduction Act (IRA) of 2022 allowed energy storage systems to qualify for Investment Tax Credit (ITC) for energy storage technologies.

This change has opened the door to a large pipeline of standalone storage development.

What Is The Standalone Energy Storage ITC?

The credit falls under Section 48 or Section 48E (depending on when construction began), the federal Investment Tax Credit, and is available to qualified energy storage systems that are placed in service after January 1, 2023.

Eligible storage technologies include:

• Battery energy storage systems (BESS)
• Thermal energy storage
• Other electrochemical or mechanical storage that meets minimum capacity and safety requirements

The base credit is 6 percent of eligible project costs, but it can increase to 30 percent if prevailing wage and apprenticeship requirements are met. These projects also qualify for additional adders, including domestic content, or if the project is placed in an energy community or low-income community.

Unlike the prior version of the ITC, this credit does not require the storage system to be directly connected to or charged by a solar system. That makes it applicable to standalone battery projects, grid-tied storage, and even retrofits to existing facilities.

Why This Matters for Developers

The storage credit creates opportunities for a much wider set of energy infrastructure projects. Key benefits include:

• More flexible project design: Storage does not need to be co-located with an energy generation facility to qualify
• New revenue models: Developers can monetize energy arbitrage, demand response, and grid services
• Expanded financing options: Tax equity and transfer buyers can now engage with storage directly
• Stronger grid resilience: Standalone systems support peak shaving, backup power, and utility resiliency

In short, storage is a standalone asset class that can participate in federal incentive markets with fewer restrictions.

What Projects Qualify

To be eligible for the standalone ITC, energy storage projects must meet the following requirements:

• Have a capacity of at least 5 kilowatt hours
• Begin construction and be placed in service after January 1, 2023
• Meet labor standards to qualify for the full 30 percent rate (or qualify for one of the bonus adders)
• Be located in the United States or its territories

Projects that meet domestic content thresholds or are sited in designated communities may also qualify for bonus credits, bringing the total incentive above 30 percent.

Transferability and Financing Options

Like other credits under the IRA, the energy storage ITC is transferable under Section 6418. That means project sponsors can sell the credit to a third-party buyer in exchange for cash, avoiding the complexity of traditional tax equity structures.

This flexibility creates opportunities to:

• Unlock upfront capital to support construction and operations
• Attract a broader pool of corporate and institutional credit buyers
• Reduce financing friction for developers with limited tax appetite

In many cases, the transfer of the credit can be completed within weeks, creating a reliable and efficient funding mechanism for storage developers.

How Fallbrook Can Help

The standalone energy storage credit has been a game-changer for the market, but like any incentive, it comes with technical requirements, documentation needs, and strategic decisions around timing and structuring.

At Fallbrook Financial Services, we help developers evaluate eligibility, structure transfers, and connect with vetted credit buyers to maximize project value. Whether you’re building your first battery project or scaling a portfolio, our team is ready to guide you through the credit process from start to finish.

Have a storage project and want to explore your tax credit options? Contact us at team@fallbrookfinance.com.

Fallbrook Financial Services is a leading advisor in tax credit monetization, specializing in renewable energy, affordable housing, and entertainment finance. We connect developers with institutional capital and offer tailored strategies across more than 40 state and federal incentive programs.